HA1022-Principles of Financial Management
Question 1
Discuss the five (5) principal functions of a modern and efficient stock exchange, which most developed or developing countries seek to establish?
Question 2
Within the context of services provided by a stockbroker, discuss the two (2) main types of stockbrokers that an investor may choose to use. In your response, differentiate between the services provided by these two (2) types of stockbrokers.
Question 3
Assume that you have $10,000 to invest in a term deposit. In this situation, explain which of the three (3) deposits listed below (a. – c.) you would select if the selection strategy is totally depend on the higher percentage per annum (per year).
a) a 90-day deposit that has a maturity value of $10,250.
b) a 130-day deposit that has a maturity value of $10,390.
c) a 145-day deposit that has a maturity value of $10,420.
Question 4
Explain the trade credit facility provided by some companies to their customers that allow them to manage their day-to-day liquidity situation and calculate the opportunity cost of an invoice that specifies the following conditions, as shown below (a. – c.):
a) conditions: 1.25/10, n/30.
b) conditions: 1.25/10, n/60.
c) conditions: 1.5/10, n/60.
Question 5
As a small software developer firm, you have approached the AXZ Bank to obtain a term loan so that the firm can purchase a new server. The AXZ bank provides two (2) offers to your company, as listed below:
a) a loan of $100,000 over a five (5) year period at an interest rate of 7.65% per annum (per year) payable at the end of each month.
b) a loan of $100, 000 over a three (3) year period at an interest rate of 5.5% per annum (per year) payable at the end of each month.
Requirements
1. Calculate the monthly loan instalments for each offer listed above – a) and b).
2. Calculate the total interest payments for each offer listed above – a) and b).
